If you are worried about the current financial crisis that is looming over us but do have some money spare you may be looking for a way to invest it. If so, what are the options available today and which ones are the most profitable and the most secure?
As we approach the winter of 2022 the cost of living is reaching a 40 year high and in part the rate of inflation is at the heart of this. One benefit of this is that if you do have savings, it is a good time to invest but what is out there for you?
Currently the top financial advice is to take advantage of the rise in interest rates and go for high yield savings accounts or high interest ISA’s or even a private pension plan that is tracked alongside either one of these types of savings schemes. All of these are great but are definitely a long-term investments opportunity.
What if you would like the chance to turn your capital around quicker as the price of the average fuel bill, coupled with the sharp rise in food costs will mean that you need something more immediate. Is there anything that you can do to boost your income on a short term basis whilst being the safest way to look after your equity?
One of the best ways for this is via stocks and bonds but what if you have no idea how they work. How do I convert my money into a profitable return and what are the risks?
Do You Need to be Gordon Gekko?
Even those with the most minimal knowledge of the stock market will be able to tell it is not a fool-proof money making certainty and stocks can go up and down easily without any control from yourself. Using a qualified and registered stockbroker is an option but they will cost you a fair percentage of any profits that you make, and they are not a guarantee to increase your savings in what is quite a volatile market. The minimum amount of investment with a broker can also be quite daunting.
So do you really need a broker to get started in the financial markets and the simple answer is no. Today there are a vast range of online trading platforms and information sites including Google Finance that are trying to entice you onto them with the notion that you can make your fortune and go sailing off into the sunset but are they really that easy to navigate?
Research is the Key
Before thinking about signing up to any of these platforms you must do your research as you would have had you taken the other, more bank account related options. In order for you to understand how they work you must at least understand in some way what you are looking for in the end or as it is know in the business, the back end.
Although the stock market produces volatile returns, it has a long history of outpacing inflation in the long run. So, if the money you have invested in the stock market is not going to be used in the next few years, it is likely safer to keep your money invested than to take it out.
That said, there are options on any trading platforms for you to make quicker returns on day or intraday trading What is Day Trading on Stocks? How to Day Trade Shares | IG UK but that will require a lot more attention than the long-term investment strategy. This is when you buy and sell stock on the same day and in some cases can be quite profitable once you have mastered the details of the online trading platform.
Useful Phrases to Know
Shareholder – These are individuals, corporations or institutions who legally owns one or more than one share of stock in a private or public corporation.
Shares or Stocks – The share gives partial ownership of a company to an investor on its earnings and assets. The value of shares fluctuates, and its movement depends on different market factors.
Bonds – It is a fixed-income instrument that an organization sell to investors. It is an amount that investors lend to the firm that issued a bond for a period of time at a fixed or variable interest rate.
Securities – Are tradeable financial assets, including stocks and bonds.
Dividends – A dividend is a payment a company can make to shareholders if it has made a profit.
Portfolio – It is the group of stock an individual is holding. It is a good practice to build a portfolio. It creates a balance between risk and reward.
Bull Market – The term is to describe the share market scenario. When the market is rising, and the public feels optimistic, the share price will go up.
Bear Market – The term describes the share market going down. People are selling shares because of prevailing uncertainty.
Bid – Bid is the maximum price a buyer has quotes to buy a share.
Face Value – Face value is a term used to state the value of the stock by the company that has issued it. It remains different from the market value.
Intraday – Intraday trading is when you buy and sell shares on the same day. The objective of intraday is for earning profit by utilizing the market movement. It is not an investment.
One of the main differences is when it is good to buy and good to sell which is what they mean but a bull market and a bear market.
A bull market occurs when securities are on the rise, while a bear market occurs when securities fall for a sustained period of time. It is important to understand the differences between bull and bear markets and how they impact your investment decisions. At the time of writing, we are most definitely in a bear market which usually means that stock and bond prices will be comparatively low so a good time for a long-term investment.
Is There a Beginner’s Guide
Yes, there are a number of ways for a complete novice to get to understand the intricacies of the stock market and most online trading platforms offer a chance for you to try out with some practice trades before you invest any money. This is a must for any newcomer as it will not only introduce you to the markets but the process of trading on your chosen online platform.
One rule of thumb that you will hear traders talk about is the 50% rule, which is a basic analogy that every trade has a 50% chance of going up and a 50% chance of going down. This is why all online trading platform forums and advice will be to not put all of your eggs in one basket. Spread the money that you have to invest across a number of different trades to give you a better chance of retaining your investment should the markets fall.
How Will we Know Which Stocks or Bonds to Buy?
This is in the financial world the holy grail of all questions as nobody can give you a definitive answer daily. However, if you are looking for advice then there are a substantial number of sources in from which to gain the facts. Although we do not have one particular recommendation here are the top listed stock information companies:
- ADVFN – FTSE 100 Share Prices, LSE stock Quotes, Forex & Financial News
- Share Tips | Stock Market Tips from the Press & Stockbrokers (hl.co.uk)
- Fool UK | Share Tips, Investing and Stock Market News
All of these companies (and there are others to choose from) will have up to date information that is reliably sourced and generally high quality. That said you will need to understand what advice is being given so take your time to understand what information they have before acting upon it.
Which Online Trading Platform Should We Choose?
Again, this is a big question as there are so many out there, but you will need to look at the terms and conditions of each one as they have varied rules and costs.
Some will offer a monthly subscription, whilst others will charge per trade and others will offer fee free trading but ultimately you will be paying something towards the membership of whichever platform you choose.
One particularly important value to take notice of is the minimum amount you can place per trade as some will be as low as £1 but as high as £250. This encourages you to take risk but also sets you a limit that you are prepared to lose.
So, which platforms will suit me you ask and here are the top four that will be beneficial to any beginners wanting to understand how the financial markets work:
- eToro – etoro.com
- Freetrade – freetrade.app.link
- IG – ig.com
- Hargreaves Landsdown – hl.co.uk
There are lots more available and if you have a higher understanding and skill level you may want to investigate some of those, but all of the above sites have the ability to offer practice bidding before you decide to invest.
Warning
As with any investment the markets that make up our stocks and bond trading can fluctuate and at times are highly volatile so you will receive warnings that your money is at risk. Do not take these statements lightly as nobody can predict if your stake will increase or decrease.
Longer term speculation will have more chance to reap any financial benefits and are advisable to take on as a beginner but once you have introduced yourself to the world of online trading you can most definitely look for a quicker and more short-term option to increase your yield.
